Background

Water privatization is turning over all or part of the production, distribution, and management of water from public to private companies. Additionally, it has become a controversial topic throughout the world.

An estimated two-thirds of the world's population will not have access to clean drinking water by the year 2025. In 2000, Fortune magazine predicted that "water is the oil of the 21st Century." Water is being compared to oil because it's so profitable that companies are eager to invest in it.

Private water companies were widespread in the United States for most of the 19th Century in various cities, including Boston, Philadelphia, and New York. About 50% of U.S. water systems were owned by private companies. Currently, about 15% of water systems are privately owned. After World War I, the amount decreased due to increased government funding. As the population in these cities increased, water services became a core function of the government. Additionally, many individuals developed waterborne (drinking water and recreational water) diseases due to contaminated private water supplies. For example, residents of Baltimore developed cholera during the time that the Baltimore Water Company owned the existing water services.

According to the National Association of Water Companies, about 33.5 million Americans currently receive water daily from private companies. The U.S. Environmental Protection Agency (EPA) estimates that about 286 million Americans receive their water supply from public water systems.

Supporters of water privatization believe that private companies may provide better services in addition to meeting health and environmental standards.

Individuals against this practice argue that water is a human right and continue to fight the water privatization movement. Additionally, water privatization has caused a negative impact globally resulting in water rate increases, scandals, job layoffs, and violent riots.

The U.S. government claims that if water services are financially supported through private investment, then resources may be focused towards other areas.

When private companies take over part of the public water systems, this is known as public-private partnerships. Additionally, private companies may completely own, build, and operate the water systems, meaning it is no longer a public-private partnership.

Technique

General: According to the U.S. Environmental Protection Agency (EPA), about 85% of Americans receive their water supply from public water systems. Additionally, the city or county water department is responsible for delivering the public water supply, which is funded by the state and federal government. The government believes that by switching to private companies, resources can be focused elsewhere.

Types of water privatization: When private companies take over part of the public water systems, this is known as public-private partnerships. Additionally, private companies may completely own, build, and operate the water systems, meaning it is no longer a public-private partnership. According to the independent, nonprofit Pacific Institute, private water companies across the world receive about $300 billion each year in profits. The Pacific Institute's goal is to promote a healthier environment. Additionally, the organization conducts water research and has developed a set of standards for water privatization described in "The New Economy." This resource describes positive and negative aspects of water privatization.

Water companies: Private water companies were widespread in the United States for most of the 19th Century. However, many individuals developed waterborne diseases (drinking water and recreational water) due to contaminated water.

Currently, about 15% of water services are owned by private companies worldwide. The two largest water companies in the world include the French company, Suez, and a German corporation, RWE, which are ranked 79th and 78th among Fortune magazine's Global 100 List, respectively. Other major water companies include Bechtel, Biwater plc, Bouygues/Saur, U.S. Water, Severn Trent, Anglian Water, and the Kelda Group.

Theory/Evidence

General: According to the National Association of Water Companies (NAWC), about 33.5 million Americans currently receive water daily from private companies.

The U.S. Environmental Protection Agency (EPA) states that private water companies currently serve about 15% of the U.S. population.

Employment: Water privatization often results in job layoffs of individuals working for the public systems in order to reduce costs and increase profits. For example, about 200 people working in government water systems lost their jobs in Indianapolis between 1994 and 1998. Following water privatization in England, about 10,000 individuals lost their jobs over 10 years.

Water privatization cases: A survey was conducted in 1999 by the NAWC to evaluate public-private water partnerships in 29 cities throughout the United States. The study concluded that water privatization improved compliance with environmental standards. Before privatization, 41% of the facilities surveyed did not meet the federal Safe Drinking Water Act (SDWA) requirements. One year after establishing a public-private partnership, all facilities were in compliance with the standards.

According to a survey performed in 2007 by the Institute for Agriculture and Trade Policy, the following states have the largest number of cities with water privatization contracts: California, New Jersey, Pennsylvania, New York, and Illinois. Additionally, 600 cities in the United States have contracts with private water companies.

A water privatization scandal spanned the cities of East Cleveland, Houston, and New Orleans in the late 1990s. Officials were bribed with money by private water company representatives in exchange for contracts to operate the water systems. The mayor of East Cleveland was sentenced to nine years in prison for his involvement with the scandal. Additionally, many public officials and business figures were prosecuted.

In January 2003, the city of Atlanta decided to end its water privatization contract with United Water. United Water and Atlanta signed a 20-year, $428 million contract in 1998, which was the largest water privatization contract in the United States. Atlanta experienced a loss of approximately $60 million.

The private water industry remained hopeful that this deal would serve as the foundation for private water companies. However, multiple problems lead to the downfall of this collaboration including job cuts, improper billing, and maintenance issues. For example, United Water charged the city an additional $80 million in unnecessary costs.

In 1999, Cochabamba, Bolivia signed a 40-year water privatization contract with the water company Bechtel. However, the water rates drastically increased leading to violent riots six months after the contract was signed. The military released tear gas and fired gunshots, which killed a 17-year-old boy and injured 100 people. Shortly after the riots, the water privatization contract in Cochabamba ended.

Stockton, California, recently ended its $600 million, 20-year contract with OMI-Thames, Inc., after only three years, regaining public control of their water systems. The Concerned Citizens Coalition of Stockton sued the city for failing to conduct an environmental review of the contract. The city experienced many negative effects during the privatization contract, including rate hikes and a sewage spill. Additionally, this case received worldwide publicity and was featured in the documentary "Thirst."

Water rights: The United Nations Committee on Economic, Social and Cultural Rights adopted the General Comment on the human right to water on November 26, 2002. General Comments are guidelines for interpreting human rights documents. The Committee stated: "The human right to drinking water is fundamental for life and health." Additionally, it provides recommendations on how the states can provide affordable and safe drinking water for the public.

Rate hikes: Water privatization has resulted in rate hikes or increased costs. A 2006 California Water Rate Survey showed that households paid about 21% more for private water systems. Private water companies serving at least 200,000 people paid on average $113 more annually than customers receiving water from public systems. For example, the private company American Water Works doubled their water costs over five years in Hingham and Hull Massachusetts. Additionally, American Water Works increased the water rates in Pekin, Illinois, by about 204% over an 18-year period. Additional problems included burst pipes, nonfunctioning hydrants, and poor customer service.

Health Impact/Safety

General: Public and private water systems are regulated by the U.S. Environmental Protection Agency (EPA). When individuals drink contaminated water, it may cause illness. This can be caused by seepage through landfills, failed septic tanks, underground fuel tanks, and fertilizers and pesticides.

According to the World Health Organization (WHO), about 10-20 thousand children die each day from water-related diseases. Also, more than one billion people do not have access to clean drinking water, primarily in China and India.

Water-related diseases: The following example illustrates how privatization made a positive impact on the health of the citizens of Milwaukee, Wisconsin.

In 1993, the largest outbreak of Cryptosporidiosis occurred in the public water system of Milwaukee, where about 100 people died and 400,000 became ill. Cryptosporidiosis is a waterborne disease (drinking water and recreational water) caused by an intestinal parasite (cryptosporidium) and may result in watery diarrhea and other stomach problems and even death.

This was the largest outbreak in history, and Milwaukee spent about $90 million for a new water purification system.

After the outbreak occurred, public health organization involvement increased. Also, a "Crypto Lab" was developed to regularly test for Cryptosporidium. Pharmacies reported frequent over-the-counter sales of medications used for the treatment of diarrhea. These policies led to safer water systems. However, there was still a need to enhance water safety.

In fact, Milwaukee signed a contract with the private company United Water in 1998 to operate the city's wastewater system. The 10-year contract recently ended February 2008, and the collaboration had a positive impact on the community. According to United Water, savings reached $170 million, and customers paid 14% less than they did in 1997 for the new $90 million system.

After the contract with United Water ended, Milwaukee decided to sign with Veolia Water North America Central LLC. Veolia's services began March 1, 2008, and the company offers enhanced technologies and coverage of 75% of the energy costs. Additionally, Veolia will develop a Milwaukee based research and development program.

Federal Safe Drinking Water Act (SDWA): The federal Safe Drinking Water Act (SDWA) ensures the quality of the U.S. drinking water and was passed by Congress in 1974. The 1996 amendments to the act suggested that alternative methods including privatization should be considered to help maintain the water quality.

The opposite case occurred in South Africa in 2003. Millions of people had their water supply cut off in South Africa because they were unable to afford payments due to privatization. Individuals then obtained their water from polluted rivers and lakes, resulting in South Africa's worst cholera (infection causing diarrhea, vomiting, and possibly death) outbreak. About 300,000 individuals were infected and 350 died.

Future Research or Applications

Public Citizen, a national nonprofit organization protecting consumer rights, has established the Water for All Campaign. The Water for All Campaign provides research and guidance to communities throughout the United States to assist in keeping water under public control. The public has been encouraged to conserve water and end pollution as measures to improve the water cost and quality.

Several states, including Illinois, Missouri, and Rhode Island, have passed laws to monitor water privatization contracts, regulate the quality of service, and encourage public involvement.

North Carolina maintains a Clean Water Management Trust Fund, which has issued about $700 million in funding to improve the state's water quality. According to the Food and Water Watch, about 83% of Americans would support a federal clean water trust fund that creates a steady funding source to improve the water quality. The American Society of Civil Engineers recently evaluated the U.S. water quality, and it was given a D-rating. Increased funding may help to repair damaged water systems.

Nations have been campaigning to regain public control of their water supplies. For example, Uruguay and the Netherlands passed laws in 2004 making water privatization illegal. Additionally, Argentina, Nicaragua, Ghana, and South Africa have had victories against the water privatization movement.

Author Information

This information has been edited and peer-reviewed by contributors to the Natural Standard Research Collaboration (www.naturalstandard.com).

Bibliography

Natural Standard developed the above evidence-based information based on a thorough systematic review of the available scientific articles. For comprehensive information about alternative and complementary therapies on the professional level, go to www.naturalstandard.com. Selected references are listed below.

The information in this monograph is intended for informational purposes only, and is meant to help users better understand health concerns. Information is based on review of scientific research data, historical practice patterns, and clinical experience. This information should not be interpreted as specific medical advice. Users should consult with a qualified healthcare provider for specific questions regarding therapies, diagnosis and/or health conditions, prior to making therapeutic decisions.